Cabinet approves SPV for TAPI pipeline, GAIL to join

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Last Updated: Thu, Feb 07, 2013 11:00 hrs

New Delhi, Feb 7 (IANS) The union cabinet Thursday approved the formation of a special purpose vehicle (SPV) for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project and allowed the Gas Authority of India Ltd (GAIL) to join the SPV.

The SPV is required to have an initial contribution of $20 million made up of $5 million from an identified entity from each of the four participating countries.

"GAIL has agreed to make an investment of up to $5 million in the proposed SPV, that is TAPI Ltd," said an official statement here.

"An active interest in the project by all the partner countries at this stage would sustain the credibility of the project, and generate interest in the international market and could eventually pave the way for selection of an appropriate consortium leader in the future," the statement said.

Last week, GAIL was accorded the Maharatna status by the government, empowering it to make investments of this kind.

The four participating countries have signed an Inter-Governmental Agreement (IGA) along with a Gas Pipeline Framework Agreement (GPFA). To accelerate the project, parties have formed the Minister-Level Steering Committee and Technical Working Group.

Suitable provisions for security and safety of the pipeline have been made in the IGA and GPFA.

At 16th Steering Committee meeting held last September all parties had reaffirmed their commitment to fast-track this important regional co-operation project.

The $7.6-billion TAPI project will transport gas from Turkmenistan. The 1,680-km pipeline (144 km in Turkmenistan, 735 km in Afghanistan and 800 km in Pakistan) will have the capacity to transport 90 million cubic metres a day (mmcmd) of gas - 38 mmcmd each for India and Pakistan and the remaining 14 mmcmd for Afghanistan.

Oil ministry sources said the SPV route was considered as no multinational company is willing to undertake the project unless it gets a share in Turkmenistan's rich gas fields.

Turkmenistan has so far turned this down as its national laws do not permit foreign equity in oil and gas fields on land.

It has agreed to grant service contracts to the overseas investors, but multinationals are unwilling to take financial and operational risks for the less profitable service contract.

"As a way forward, Turkmenistan suggested the formation of a SPV by the TAPI members. The SPV would take up the feasibility study and design work for the TAPI pipeline to meet the agreed timelines for the project, as well as search for a consortium lead," the statement said.

TAPI will be the first transnational line for which India signed a Gas Sales and Purchase Agreement (GSPA) in May last year.

From the field, the pipeline will run to Herat and Kandahar province of Afghanistan, before entering Pakistan. In Pakistan, it will reach Multan via Quetta before ending at Fazilka in the Indian Punjab.

The 735-km section of the pipeline in Afghanistan will go through sensitive security areas, while the next 800 km through Pakistan will be a test of its resolve to normalise trade with India by allowing safe passage of the gas, say analysts.

Turkmenistan is promoting the pipeline as part of its plans to cut reliance on supplies to Russia and to boost annual gas exports to 180 billion cubic metres by 2030.